NJ Office that probes insurance fraud is target of fraud inquest

May 27, 2005, 12:15 PM EDT

TRENTON, N.J. — The state’s award-winning office created to root out insurance fraud is under scrutiny itself, with the state auditor probing allegations the insurance industry was billed about $4 million for employees who never worked on fraud cases.

The probe stems from a letter to a ranking state senator by a retired investigator from the state Division of Criminal Justice who said 43 employees had their salaries paid with insurance industry money but did little or no work on fraud cases.

“We investigate doctors for submitting false bills to insurance companies, and we put doctors in jail for that. What’s the difference here?” Edward Buttimore, the retired investigator, told The Star-Ledger of Newark for Friday’s newspapers.

Criminal Justice Director Vaughn McKoy, whose agency oversees the New Jersey Office of Insurance Fraud Prosecutor, denied the office misspent money.

He said Buttimore had filed a notice this week that he may pursue legal action against the division, alleging he was mistreated and discriminated and retaliated against. Such a notice is generally a preliminary step to filing a lawsuit.

Buttimore said his letter earlier this month to Senate Judiciary Committee Chairman John Adler had nothing to do with the notice of a possible lawsuit.

State Auditor Richard Fair began investigating the insurance fraud prosecutor’s office in January at the behest of McKoy and the state attorney general after an anonymous letter that made claims similar to Buttimore’s was sent last fall to various government offices. Adler requested the auditor’s intervention after receiving Buttimore’s letter.

In his letter to Adler, Buttimore included the names of the 43 employees, a list he said he compiled by cross-checking a criminal justice division roster with a list of names submitted to the insurance industry as working on fraud cases.

Criminal Justice spokesman John Hagerty said those employees could be providing services to the fraud prosecutor’s office that Buttimore is unaware of.

Fair’s office is examining payroll records for the insurance fraud unit and those of the Division of Criminal Justice to determine each employee’s duties. Auditors are also examining other expenses for office equipment, cell phones and vehicles that were billed to insurance companies, checking to verify they are related to fraud investigations.

A report from Fair’s office is expected in about a month, but the criminal justice division may be given an opportunity to respond before the report’s release.

The fraud prosecutor’s office was created in 1998 to track down fraud schemes that officials say drive up the cost of auto and other insurance coverage. The fraud office is funded entirely through annual assessments on the insurance industry.

Last year, it recovered $16.2 million in criminal and civil restitution for insurance companies and tallied a 100 percent conviction rate for prosecuting scams. It was also named the best fraud bureau in the nation by an insurance industry group.

Information from: The Star-Ledger, http://www.nj.com/starledger